Archive for category Prescription Drug Prices

Since the advent of the PBMs, the concept of reference pricing for pharmaceuticals has seen multiple waves of interest and policy discussion but only minimal uptake. Reference pricing, sometimes referred to as a therapeutic MAC, requires patients to pay the full difference between the price charged at the pharmacy and a reference price reimbursed by the insurer. The reference price is the price of a low-cost drug in a therapeutic cluster of drugs considered clinically equivalent in the treatment of a condition.

Over the years, reference pricing has been used successfully in many countries, including Canada and Britain, to manage prescription spending without reducing quality of care. However, concerns over complexity and member satisfaction as well as the PBM industry’s historical reliance on rebates (prior to the growth in pass-thru models) have been barriers to the adoption of reference pricing in the U.S.

A study just published in The Journal of Managed Care Pharmacy, reports the results of Arkansas’ experience with reference pricing for proton pump inhibitors (PPIs) for its state employees. Arkansas implemented reference pricing for PPIs including esomeprazole but excluding generic omeprazole, on September 1, 2005. Beneficiary cost share for all PPIs except generic omeprazole was determined from comparison of the PPI actual price to the $0.90 omeprazole OTC reference price per unit.

Over 43 months of reference pricing, net plan costs for PPIs fell dramatically by 49.5% PMPM compared with the preperiod, despite an increase in the pharmacy dispensing fee. In the first quarter of 2009, the net spend for PPIs was only $2.19, despite the state’s significantly higher than average utilization of PPIs. While PPIs costs have been declining recently for most plan sponsors as more patients use generics, the state of Arkansas’ savings greatly exceeds those of other plan sponsors without reference pricing. The authors estimated the net savings at $1.31 PMPM over the nearly four year study period relative to a very large and diverse comparison group. As the authors point out, the savings would have been even greater had they included generic omeprazole in the reference pricing list.

Equally important given concerns that reference pricing is too complex for the average consumer, utilization of PPIs did not change yet beneficiary costs actually decreased by 6.7% due to a large movement away from branded PPIs to OTC and generic omeprazole. Between 2004 and 2009, marketshare for omeprazole, generic and OTC combined, grew from 57 to 86%. Given these results, it appears that the employer did a nice job of making beneficiaries aware of lower cost therapeutic alternatives, which patients took full advantage of over the course of the study.

The study authors make little mention of the member “noise” resulting from this plan design change; but given the large uptake in omeprazole that was observed and the state’s long-term, continued adoption of the program, it is reasonable to conclude that any member noise was manageable and likely dissipated quickly with time, as I have repeatedly seen with other types of major plan design changes. Bottom line: This evaluation provides solid evidence that reference pricing for PPIs can save real dollars without reducing utilization. For plan sponsors looking to optimally manage their drug spend, referenced-based pricing is worth consideration.

A November 2010 report from the International Federation of Health Plans (iFHP) highlighted differences in health care prices across different countries. It is no surprise that the U.S. leads the world in costs and prices for the 14 different services and procedures, which ranged from hip replacements to MRIs. The real concern, of course, is that our health outcomes are not better, and in fact, worse than many of the other countries that spend far less than the U.S. does on health care.

Receiving less attention is the reported differences in drug pricing across the three countries. In the report, iFHP examined pricing for Lipitor, Nexium, and Plavix, finding more than a 4-fold difference in pricing for Lipitor, a 6-fold difference in pricing for Nexium, and more than a 3-fold difference for Plavix.

Keep in mind that these prices are not all directly comparable. In fact, I threw out France, Australia, and the Netherlands because of fundamental differences in reporting. In addition, the U.S. data may not have fully captured rebates. That said, the average price for Plavix in the U.S. was $152 compared with $57 in the UK and $76 in Canada, two countries that do allow for comparison. For Lipitor, the average U.S. price was $129 while UK and Canada paid less than $40.

As with costs for other healthcare services, the finding of much higher drug prices in the U.S. is not new information, and it is fortunate that generics are available for two of these medications. However, this report is a reminder that we are using more of and paying more for pharmaceuticals than other industrialized countries, often without clear evidence of value. The link between pharmaceutical spend and clinical outcomes in the real-world is still in its infancy and represents an opportunity for those organizations willing to tackle the tough questions of value and equity.